A Discussion with Bradley R. Staats, Assistant Professor of Operations, Technology, and Innovation Management Kenan-Flagler Business School, University of North Carolina

Lean principles, exemplified by the Toyota Production System (TPS), have become a vaunted methodology in the operations community. Many credit Toyota’s sustained success to its persistent application of these ideas to manufacturing and management systems.

Here’s the $64,000 question: can you translate TPS principles geared to the shop floor to IT outsourcing? Wipro and an academic team headed by Bradley Staats at the University of North Carolina decided to find out.

Six years ago Wipro wanted to enhance its service offerings, according to Staats, who is an Assistant Professor of Operations, Technology, and Innovation Management at the Kenan-Flager Business School. The service provider wanted to take on more complex assignments that solved its customers’ business challenges, thereby adding value. To do this, the Indian supplier turned to TPS. Back in 2004 no one had tried to apply manufacturing principles to software services and IT work at the scale that Wipro was operating, the professor recalls. Wipro approached him, since his specialty is the intersection of technology and operations. While the company’s Lean initiative unfolded, Staats studied the process and then the results.

The study took three years and the partners are still working together periodically to further refine the process. So, does it work? Staats measured results with the Lean teams against Wipro teams using the old methodology. “It really did improve performance appreciably,” he reports.

Four steps to Lean tasks

The professor says one of most important tenants of the TPS is to start a project by working backwards. First, the Wipro teams had to discover the challenges the outsourcing buyers needed to solve. Then, it had to focus on solutions to that challenge. Finally, they had to establish a deliverable plan that can do that. “This is how to deliver outsourcing value,” Staats explains.

Staats says Wipro established a four-step process to tailor TPS to its needs:

Specify the task. Do this in great detail. People need to know exactly how to accomplish the work they are doing.

Streamline communication. Establish direct communication pathways between people. Staats said in many companies an employee will finish a task and send his work to four or five people, having to wait to hear from all of them before going on to task B. Instead, he should be able to send the report to just one person who then responds promptly.

Simplify the process architecture. Map out every step so that everyone understands the interconnections between steps and can eliminate waste.

Adopt hypothesis-driven problem solving. Discuss how the team thinks it can improve the work. Create hypotheses and then test them by comparing them with real-world results.

In addition, there were three challenges specific to software services:

Task uncertainty. Staats says in his experience some outsourcing buyers change the requirements continually. “The challenge is: how does a supplier standardize processes when the processes change rapidly?” the professor asks rhetorically. The goal, he says, is to create efficiency by removing variance.

Process invisibility. Often, employees do much of the work using “the knowledge in their heads,” says Staats. Lean, on the other hand, “tries to bring everything out in the open.” The Wipro team had to figure out “how to do this with knowledge work.”

Architectural ambiguity. When creating software, the engineers often won’t know if it works until they do it.

Adapting the Lean process to software services: lessons for everyone

While many of the procedures just didn’t apply, TPS’s cardinal rule of lowering inventory wasn’t a direct issue for a software services company; many of the ideas were valuable. For example, if there’s a problem on the production floor, Toyota workers pull on an andon cord. This signals a manager to come running to help the worker solve the problem. Wipro didn’t install these cords into the offices. But it did put a structure in place to provide immediate assistance to a worker who faces a work challenge. “This is powerful,” points out the professor.

Staats says, in any operation, managers have to find tools that can identify problems “as early as possible. Then have the person who made the mistake fix it immediately, right where it went wrong.” Having that particular employee make the correction is important for two reasons: he or she has the relevant knowledge to actually fix it and it teaches the employee what to do so he or she won’t do it again.

Another challenge is for the offshore Wipro team to understand in detail what is happening at the customer location. Obviously, teams in India can’t just walk out to their offshore customers’ location whenever they face a challenge. Staats says one Wipro team came up with a clever adaptation.

The buyer was testing new software at its headquarters. The software engineer told the offshore team about it, but they couldn’t replicate the problem. So the Wipro team used WebEx and watched the individual go through all the steps to make the problem happen. Then, the buyer’s engineer went home and the Wipro team solved the problem. “Now they could identify the problem because they knew exactly what steps to take,” the professor points out.

Another adaptation was modifying the Toyota’s visual control board, which the manufacturer uses to track progress on the shop floor. “It’s graphically tracks the progress and productivity of the organization,” explains Staats.

The Wipro project manager puts every team member’s name on a blackboard on the vertical axis. The days of the week make up the horizontal access. The manager fills in the squares with the work that each team member is supposed to accomplish each day. The employees fill in what they actually accomplished each day before going home.

Staats says the control board helps managers see if a team member is not performing as expected. This doesn’t mean the team member is incompetent. What it usually means is the person hit a problem and needs other members’ help in solving it. The project manager can assign others to help so the team gets the job done.

Another benefit is everybody gets to see what everyone else is doing. “Employees often feel they are doing more work than everyone else. Sometimes they are! But more often they realize everyone is busy and working hard. This information is good for team motivation,” he says.

Why Lean is good for outsourcing

The Lean solution provides benefits to outsourcing buyers, according to the professor. They include:

Providing great value because the outsourced supplier can complete the work more efficiently and with higher quality

Giving the supplier more flexibility to craft a better solution. The professor says some suppliers use formal outsourcing models, which limits their flexibility. “The early results show this method produces more flexibility,” he reports.

Focusing the supplier’s attention on the value the customer is looking for. “By working backwards from the end state of the customer’s value, the supplier is able to design the process and then drive to that value. This methodology forces the supplier to focus on the end game,” Staats says.

Removing the focus on technology. “Buyers tell me, ‘Sure, the technology is great. But where’s the business value?'”

He says Wipro has received a number of requests from buyers interested in this type of engagement. “There’s value in talking to them about this,” he concludes.

Lessons from the Outsourcing Journal:

A Lean solution provides benefits to outsourcing buyers including:

Providing great value because they can get the work completed more efficiently and with higher quality

Giving the supplier more flexibility to craft a better solution

Focusing the supplier’s attention on the value the customer seeks because the supplier works backwards from the end state

Removing the focus on just technology

Managers who use Toyota Production System (TPS), based on Lean methodology, find tools that can identify problems as early as possible. Then they can have the person who made the mistake fix it immediately, right where it went wrong. This procedure works because they have the relevant knowledge to actually fix it and it teaches them what to do so they won’t do it again.

Using a visual control board tracks progress, creates the opportunity for positive interventions, maps the productivity of the team, and builds team spirit.

Wipro set up the Council for Industry Research, comprised of domain and technology experts from the organization, to address the needs of customers. It specifically looks at innovative strategies that will help them gain competitive advantage in the market. The Council in collaboration with leading academic institutions and industry bodies studies market trends to equip organizations with insights that facilitate their IT and business strategies. For more information on the Research Council visit www.wipro.com/industryresearch or email [email protected].